The report also recommends halving Landcare funding, scrapping the Co-operative Research Centres and reducing funding for the Rural Research and Development Corporations.

The Federal Government won't reveal which, if any, of the recommendations it might adopt, until Budget night on May 13.

But the Parliamentary Secretary for Agriculture, Tasmanian Liberal Senator Richard Colbeck, has spoken out against a number of the recommendations, saying the government will honour its election commitments.

Senator Colbeck told ABC Rural that the Coalition remains committed to increasing Commonwealth spending on rural R&D by $100 million over four years, and that he has 'no expectation' that the Farm Finance concessional loans scheme will be scrapped.

Senator Colbeck also says he doesn't support scrapping the Rural Financial Counselling Service, noting the government recently allocated more money for additional rural financial counsellors in Queensland.

"I've had the opportunity to work pretty closely with these [RFCS] organisations over the past six or seven years. They do a great job and they're very much trusted by the farming community, they become part of the local community," he said.

"I'm not sure that [relying on the private sector to provide financial services to struggling farmers] is quite right, because you need a willingness of the customer to go and visit those institutions.

"Sometimes farmers aren't happy to go and talk to their bank, they aren't necessarily happy to go and talk to Centrelink, so the Rural Financial Counselling Service provides a particular service that is trusted by the community and I think that's important."

Labor's agriculture spokesman Joel Fitzgibbon is scathing of the report.

"I haven't spotted anyone on the audit commission with a rural background and I think it shows," he said.

"Their recommendations for trimming fat, if you like, in agriculture are ill-conceived and fail to recognise some of the challenges our farming sector faces, and in particular the vagaries of the weather they have to deal with."

Concern over research and development funding

The head of the Co-operative Research Centres Association, Professor Tony Peacock, has urged the Federal Government not to put sector-specific research programs on the chopping block.

CoA Factbox

Commission of Audit at a glance

Abolish the Rural Financial Counselling Service in favour of private providers. The RFCS has been in place since 1986 as a free counselling service for farmers, fishers and small rural business in financial distress

Halving funding to the National Landcare Program (formerly known as Caring for our Country)

Abolish the Farm Finance concessional loans scheme, established under Labor and continued by the current Federal Government

Abolish sector-specific research and development programs, and reduce government support for Rural Research and Development Corporations, 'to better reflect the mix of private and public benefits’

Murray Darling Basin Authority to be brought into the Department of Environment to achieve cost savings

Scrap the National Water Commission and move its functions into the Department of Environment, or transfer its duties to the Productivity Commission

No more Commonwealth spending for water-savings infrastructure in the Murray-Darling Basin, once the current Basin Plan programs are finished.

Cut Austrade and bring any of its remaining functions into the Department of Foreign Affairs and Trade

Scrap Export Marketing Development Grants

Source: Commission of Audit; http://www.ncoa.gov.au/index.html

"MSA grading system, solutions that are coming out of farm futures CRC, all the genomics work in the dairy and sheep industries, have all come out of CRCs, and they've made a really important contribution.

"So we were very surprised to hear them say that the money should be taken holus bolus and put into the Australian Research Council."

Wool grower, Ed Storey, from Yass, on the southern tablelands of New South Wales, says the recommended cuts to the rural sector are ridiculous.

Mr Storey, who's also the chair of the NSW Farmers' Association Wool Committee and a director of Wool Producers Australia, says government-supported research and development helps keep rural industries competitive.

"A significant amount of the research that goes on is all funded by the industry themselves [sic]," he said

"Growers pay levies and funding is generally matched by government."

Research bodies like Australian Wool Innovation are sometimes criticised by their members for not using grower levies effectively, but Mr Storey says that's not a good enough reason to reduce government funding.

"Have we been guilty in the past of squandering some of that research and doing projects that really are not going to deliver benefits?

"Yeah, I'm sure we have, but to massively cut rural research is not something that's wholly justified because it's hugely contributed to by the growers themselves.”

After watching farmers in north-west and western NSW battle through one of the worst droughts in decades, Mr Storey says he's vehemently against the recommendation to abolish Rural Financial Counselling Service.

"There (are) services and provisions for social services for those in city areas, for those that are doing it tough at any given time, so there's no reason that that service shouldn't be available (in the country).

"We're talking maybe a couple of dozen people around the country, maybe a few more, I don't know, but it's not such a huge amount of money that it's going to fix the budget and I support them.

"I think they do a lot of good work and provide tremendous value for money."

The grains industry is far from happy with proposed cuts to research and development funding in the grains industry.

Grains president of Queensland lobby group AgForce, Wayne Newton, says there is real value in government contributing to research and development.

"At the end of the day, there is huge community benefit in the efficiency gained and the productivity gains through rural research and development and in the grains industry.

"It has been the research and development gains that have actually kept us in business, against ever declining terms of trade."

Mr Newton says he does not believe handing over R and D to private companies would bring the same benefits as public sector research.

"I think it would tremendously narrow the focus of the research effort.

"They are focussed on doing work on the areas, where they can recover a significant return on their investment.

"In all the other areas of research, which constitute about 50 per cent of the R and D budget, things about farming systems, soil biology and soil health, technology and machinery won't be driven by the Monsantos of the world.

"They are just not interested. They want to breed something they can get the royalties from and they recover their profit that way."

Currently, the Federal Government matches industry contributions dollar for dollar for up to 1 per cent of the gross value of production for research.

Managing director of the Grains Research and Development Corporation, John Harvey, says that amounts to around $170 million a year, with two-thirds coming from industry and one-third from the Federal Government.

He says this is spent over 25 different crops, and when you add into the mix, research funding provided by the CSIRO, universities and state agriculture departments adds up to $400 million a year spent on grains research.

"When you look at the size of an industry, which is valued at over $9 billion, it's a small amount, but it is really critical that we make sure there isn't duplication, that every dollar is working hard, be it a levy dollar or a CSIRO dollar," Mr Harvey said.

"That involves looking at what facilities we have got, looking at what programs we have got, making sure we are building the right collaboration between researchers, to deliver the best possible return."

Senior policy advisor, Dale Miller, says they want to meet with the Federal Government to discuss the proposed cuts to what he believes are valuable industry programs.

He says one of the most concerning recommendations is to cut the Rural Financial Counselling Service.

"We see that it delivers a vital service to primary producers in helping them look after their financial situation, as well as giving them tools to access government assistance, so we were very disappointed that it was on the list of programs to be abolished."

The New South Wales Farmers Association says it's alarmed and concerned at the audit findings on regional programs and funding for the farm sector.

President Fiona Simson says it doesn't sound like the Commission understands agriculture or drought funding.

"The drought funding cuts are very surprising as the Commission says that they are against the concessional loans as that encourages farmers to take on more debt, but this is not what the concessional loans are for.

"They restructure existing debt at much lower interest rates to help farmers ride out the drought.

"We don't think agriculture can sustain the cuts at this level, and we need the government to stand behind farmers during a very difficult time."

The Commission of Audit says the work that Landcare does, that can be done by private landholders, doesn't need to be funded by taxpayers.

It recommends a halving of the $2 billion annual Commonwealth contribution.

"That doesn't make any sense to me and such a massive cut will jeopardise a lot of on farm work," said Rob Dulhunty, chair of Landcare NSW.

"In addition, it could potentially devastate the new funding model for Local Land Services here in NSW, as they rely on Landcare funding from the Federal Government.

"I am calling on (ministers) Barnaby Joyce and Greg Hunt to back Landcare publicly and rule out the billion-dollar cut proposed in the audit report."